Credit Unions vs. Banks – What’s the Difference?

Daniel Penzing
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Major Differences

Between Credit Unions and Banks:

Credit unions and banks are easy to confuse. However, they’re truly different institutions. While they’re both financial institutions, their missions and structures are really what sets them apart.

Credit unions are cooperative financial institutions where account holders (shareholders) work together to make decisions about the direction of the institution. Because they’re more personal (and less bureaucratic), credit unions tend to have more flexible qualifications than banks.

Banks, on the other hand, tend to be more corporate institutions. Because of these differences, credit unions and banks offer different products and services.

The major differences between credit unions and banks include:

Business structures: Credit unions are cooperative financial institutions whose members work together to make decisions. Banks, in contrast, are corporate institutions whose clients do not directly participate in decision-making processes.

Account types and qualifications: Credit unions offer reasonable lending qualifications and lower interest rates for all types of loan types. Banks, on the other hand, often specialize in certain loan types.

Service: Credit unions tend to offer more personal service and quicker loan decisions. Banks, on the other hand, can be more corporate and bureaucratic in their business practices and decision-making processes.

Major Similarities

Both banks and credit unions offer many of the same products and services. On the whole, these two types of financial institutions are constantly competing with each other in order to serve consumers better. Although they are both great at finances, credit unions and banks have many things in common. Here are some of the similarities that they have:

  • Both banks and credit unions provide checking and savings accounts, along with loans and credit cards
  • Both types of lenders have access to low interest rates on savings and a low cost of funds
  • Banks and credit unions are both regulated by the government – but they have different kinds of regulations

How to Choose Which One Works for You

Credit unions and banks can seem like similar services, but they have a number of differences. On the surface, they both serve to provide financial services, so most people think they are the same. However, the two are actually quite different in all types of ways. This is important to remember, as you may be a good fit for a bank but not a credit union. In this article, you’ll find a comparison of the two and learn how they are different from one another.

Services

As most banks and credit unions are focused primarily on customer needs, they both tend to offer a wide range of services. Most provide checking and savings accounts, as well as a variety of loans, mortgages, and credit cards. Credit unions generally offer these same services, as well as other perks, such as competitive interest rates, better loan terms, and a better relationship with other members. These perks are possible because credit unions are owned by their members, not just shareholders.

Banks and credit unions also offer similar services for businesses, such as business loans, credit cards and other advances. Business owners can also turn to these institutions if they need equipment financing or other business credit options. For business owners that depend on cash, banks and credit unions frequently offer access to back-up systems, such as cash advance loans and overdraft protection.